The country's trade deficit with China widened to a record $14.2bn as Chinese imports rose to a record high.

The US dollar fell on the news, while the value of US bonds rose as traders said the data suggested that interest rate rises would be less aggressive than previously thoughts.

The widening deficit came as a shock to Wall Street.

"It suggests a major downward revision to second quarter GDP. It's obviously dollar-negative," said Rebecca Patterson of JP Morgan.

Kevin Logan, an analyst with Dresdner Kleinwort Wasserstein, described the figures as "extraordinary".

"I've never seen this big a swing in one month," he said.

Falling confidence

"Perhaps the most disturbing news would be the deep drop by exports, where the earlier rise in exports supplied important support to the US manufacturing sector," said John Lonski, chief exconomist at Moody's Investors Service.

Data released on Friday also showed that US consumers are less confident about their economic prospects than they were last month.

The University of Michigan Index of Consumer Sentiment dropped from 96.7 in July to 94 in August.

Analysts said a slowdown in US job creation, record oil prices and heightened security fears were to blame for growing consumer concern.